Substance vs. Form Concept in accounting and taxation refers to the distinction between the material or essential part of a transaction (substance) and the observance of legal or technical order (form). It is critical to distinguish between these in various tax situations, where courts and the IRS may look past the form to determine the actual substance of a transaction.
A tax audit is an examination of an individual's or organization's tax returns by the tax authorities to ensure that financial information is reported accurately and according to taxation laws. The primary aim is to verify that the amount of tax declared and paid is accurate.
A non-refundable tax credit designed to support elderly and disabled taxpayers by reducing their federal tax liability.
A tax deduction reduces the amount of income subject to tax, thereby decreasing the total tax bill for individuals or businesses. Tax deductions can encompass a wide range of expenses, from mortgage interest to medical expenses.
Tax evasion is the illegal act of deliberately misrepresenting or not reporting income to reduce tax liabilities. This practice involves concealing income, inflating deductions, or using deceptive methods to evade tax obligations.
Penalties imposed by tax authorities for failing to meet statutory tax requirements, differing for income tax, corporation tax, and value-added tax (VAT).
A tax preference item is an income or deduction excluded or partially excluded from regular tax calculations but must be added back for alternative minimum tax (AMT) purposes.
Tax Rate Schedules provide predefined percentages applicable to various income ranges, crucial for the taxation process of individuals and entities. These schedules must be utilized by taxpayers with taxable income of $100,000 or more, while others typically use detailed tax tables.
A professional who is compensated for preparing, assisting in preparing, or reviewing tax returns. They must sign the tax returns they handle.
A tax year is a period used for calculating annual income tax returns. It is commonly a calendar year but can also be a fiscal year, which is any consecutive 12-month period that does not necessarily start on January 1st.
Denoting an amount that can be deducted from income or profits, in accordance with the tax legislation, before establishing the amount of income or profits that is subject to tax.
Tax-exempt income refers to specific types of income that are not subject to federal income tax. This includes certain Social Security benefits, welfare benefits, nontaxable life insurance proceeds, armed forces family allotments, nontaxable pensions, and tax-exempt interest.
A Tax-Exempt Organization is a non-profit entity primarily operated for a purpose other than making a profit and is exempt from federal and state income taxes.
A portion of Social Security benefits may be included in taxable income, contingent upon the taxpayer's filing status and total income.
A taxpayer is an individual or entity that is liable to pay taxes to a governmental authority, including but not limited to the Internal Revenue Service (IRS) in the United States.
A Taxpayer Identification Number (TIN) is an identifying number assigned to a taxpayer or entity for tax purposes in the United States.
A Taxpayer Identification Number (TIN) is a unique identifier used by the Internal Revenue Service (IRS) in the United States to track and manage taxpayers' various tax-related activities.
The concept of 'Trade or Business' encompasses all activities and operations undertaken with the aim of generating profit through commercial or trading transactions. It is a critical term for both taxation and business regulation purposes.
A Treasury Decision (T.D.) is a formal pronouncement issued by the United States Department of Treasury that implements, interprets, or prescribes law or policy related to taxation and the Internal Revenue Code.
Underestimation in the context of taxation occurs when taxpayers pay less tax than they owe, which can lead to underpayment penalties and is often linked to terms such as underpayment penalty and underwithholding.
The underpayment penalty, also known as the estimated tax penalty, is levied on taxpayers who do not withhold enough tax or fail to make sufficient estimated tax payments throughout the year.
Unrelated Business Income (UBI) pertains to income generated by a tax-exempt organization from activities unrelated to its primary exempt purpose.
Understanding the concept of Unrelated Business Income (UBI) which refers to the income generated from activities unrelated to a not-for-profit organization's tax-exempt purpose. A corporate tax is applied to such income to ensure fair competition with taxable organizations.
The W-2 Form is a tax form that each employer sends annually to each employee and to the IRS. It includes details of the employee's gross earnings and deductions for federal, state, and local income taxes as well as FICA. Employees are required to attach a copy to their tax returns.
The W-4 Form is used by new employees and existing employees who wish to change the number of personal exemptions claimed for tax withholding purposes. This form directly impacts the amount of federal income tax withheld from an employee's paycheck.
The IRS W-9 form requires taxpayers to provide their Social Security number, employer identification number, or other identification to a payer, enabling the obligation of reporting interest, dividends, royalties, or other payments made to the taxpayer to the IRS.
